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What’s the FCRA law about?

What’s the FCRA law about

FCRA stands for Foreign Contribution (Regulation) Act. The Act was first drawn up in 1976 by the Indian government to regulate the acceptance of foreign contribution by way of financial donations or foreign hospitality (air tickets, hotels, entertainment and foreign purchases), offered to individuals or organizations involved in electoral politics or public life such as politicians, bureaucrats, judges, journalists, NGOs, media personnel, etc. Since these individuals or organizations can influence or impact government policy, political outcome and public opinion, it was felt imperative by the government to regulate and monitor the same. The FCRA has since been revised based on emerging situations.

Why has FCRA been in the news?

While actions of various NGOs, media and private think-tanks have always attracted government attention, it was the public agitation against the Kudankulam Nuclear Power Station in Tamil Nadu that propelled the government to train its guns on privately-funded NGOs.

At the time, the government believed that foreign funds received by certain NGOs were diverted to fund these protests. The Ministry of Home Affairs stepped in to investigate and subsequently, bank accounts of some organizations were frozen.

How is foreign contribution defined?

As per Section 2(1)(h) of FCRA, any donation, delivery or transfer made by any foreign source in any currency, Indian or foreign, or any article or security, to any individual or organization, will be deemed as foreign contribution. This does not include compensation received for any transaction or services provided to an international individual or organization. Any interest earned on foreign contribution and invested in any bank will also be considered as foreign contribution and come under FCRA. Any gift received for personal use from any foreign source and above the value of Rs 25,000/- will be deemed foreign contribution and will fall under FCRA.

How is foreign source defined?

  • As per Section 2(1)(j) FCRA, 2010, a foreign source is specified as:
  • Any foreign government or any of its agencies
  • Any international institution or organization not part of United Nations or its affiliate such as IMF, World Bank etc
  • Any foreign company
  • Any domestically promoted organization registered in another country
  • Multinational and transnational corporations
  • Citizens of a foreign country
  • Foreign trusts or foundations
  • Clubs, societies and associations registered in a foreign country

What about funds received from NRIs or individuals of Indian origin, but citizens of another country?

NRIs holding Indian citizenship are permitted to make contributions from their personal savings through normal banking channels but subject to submission of passport details. These donations will not be treated as foreign contribution. In case of persons of Indian origin who are citizens of another country, their donation will be treated as foreign contribution. This applies to PIOs and Overseas Citizens of India as well.

Who is qualified to receive foreign contribution?

As per Section 2(1)(m) FCRA, any ‘person’ with a specific economic, cultural, educational, social or religious programme, can receive foreign contribution after obtaining the requisite permission from the Central Government.

Are donations by overseas relatives treated as foreign contribution under FCRA, 2010?

The answer to this has been clarified under Section 4(e) FCRA, 2010 and Rule 6 of FCRA, 2011. While Section 3(1) of FCRA 2010 (refer below) excludes certain category of individuals from receiving foreign contributions, under Rule 6 of FCRA, 2011 they may be permitted to receive foreign contribution from relatives of up to a sum of rupees one lakh in one financial year. For any amount exceeding that, Form FC-1 must be submitted within 30 days to the government.

Can foreign contributions be made in Indian rupee?

It is permissible to accept foreign contribution in INR.

Is interest earned from deposits a foreign contribution?

Any interest earned from deposits of foreign contribution will be deemed as second foreign contribution and will have to be declared as receipts for that year in which it was earned, while filing the annual returns.

Who are barred from receiving foreign contribution?

Section 3(1) specifies who all are barred from receiving foreign contributions and they include:

  • Candidates standing for elections
  • Member of any Legislature
  • Mediapersons including journalists, correspondents, cartoonists, editors, owners, publishers or printers of newspapers or electronic media
  • Government servant or employees of any government agency
  • Judges
  • Political parties and their office bearers

Are NGOs permitted to invest foreign contribution received on Mutual Funds or any other speculative instrument?

No. NGOs are barred from making any speculative investments, including Mutual Funds, as defined under Rule 4, FCRR, 2011.

However, they are permitted to invest in non-speculative instruments such as bank deposits, which offer fixed returns, or any similar investment in any government approved financial organization. Debt based instruments offering fixed returns are deemed as non-speculative investments.

Are foreign contributions allowed to be received in multiple bank accounts?

No. Foreign contribution must be received in the designated single foreign currency account only. However, the amount once received may be transferred into multiple accounts subsequently but subject to submission of the information in plain paper to the Ministry of Home Affairs, within 15 days of opening the account. Separate accounts must be maintained for foreign receipts and domestic receipts.

Penalties in case of FCRA violation

In case of non-compliance or violation of any rule under FCRA, the government may seize or confiscate foreign receipts, seize all accounts and records, and/or seize any assets of the violating individual or body. It may impose fines of up to five times the value of foreign contribution spent or imprison violators for a period of up to five years and/or both. In case of repeated violations, a restriction from receiving any foreign contribution for a period of 3 years may be imposed.

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